3 Steps for Developing Sales Promotion Tactics

There are many steps to be taken while developing Sales Promotion Tactics. These steps are: 1. Establishing objectives 2. Decisions of Incentives 3. Post Sales Promotion programmes!

1. Establishing objectives:

Sales promotions objectives are derived from broader promotion objectives, which are derived from more basic marketing objectives developed for the product. The specific objectives for sales promotions vary with the target market.

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i. Consumers:

Sales Promotions are aimed to encourage purchase of larger size units, building trial among nonusers and attracting switchers away from competitor’s brands.

Sales Promotions encourage support of a new product or mode, encouraging more prospecting and stimulating off-season sales.

iv. Saks promotions as brand builders:

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Can sales promotion actually be used in a long-term, strategic way to build brands and not just temporary increments in sales volume? Creating a brand is a time-consuming process because it involves organisational commitment and orchestrating the resources in the right manner and channel for building the brand’s image in the mind of consumers. Promotion, on the other hand, is a short-term phenomenon.

ACT NOW is the definition of sales promotion; tomorrow will be too late! Although brand building is a long-term process whereas Sales Promotions are short-term and temporary measures, but still Sales Promotions can be used as an effective brand-building tool. Marketers must recognise where sales promotions fit into the marketing mix and what goes beyond the promotion. There should be a synergy between brands and promotions. Here are some tools how to do that:

1. Construct: A “construct” is the way a promo is designed. Promotions should be constructed keeping in mind brand objectives and consumer behaviour. What is the effort a consumer or a dealer has to put in to get the benefits? Does s/he have to return crowns to win a free trip, or enter a contest to win something?

2. Length of the Promotion: The duration should be right. It should not last too long to let laggards in, and not too short for the early adopters to miss-out on an opportunity to try it out.

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3. Rural Promotions: A promo for a rural audience could be completely different from the one designed for an urban market. Media penetration is not high in rural areas, therefore promos work well towards building the brand. Wilkinson Sword India launched a rural promo for its safety blades, the top two prizes being lOOgm of gold, and a motorcycle, both on the rural aspirational list.

4. Perfect Timing: The right time is when the consumer has the desire to spend. The turn of the millennium was the perfect launch pad for many urban campaigns. Festivals, occasions, events may be ideal for a rural promo. At the same time, a festive promo must be followed up with a local field level promotion as well.

5. Zero Hour Glitches: Let there be no loopholes in the promo. Inventory depletion should not be a problem. The minute the consumer sees the promo; the product should be made easily available. Bad timing can be disastrous. A leading publication was giving away ten CDs with a subscription. Many of the subscriptions were cancelled because it took more than twelve weeks for the CD to reach the consumer.

6. Make sure the promotion is justified

7. Think strategically

8. Have the right kind of promotion fit for your brand image

9. Look at every promotion both for the sales job and as a communications tool

10. Formalise the promotion planning process to include a rationale for its existence and the timing of each promotion. Promotions reinforce what the brand stands for in the consumer s mind. What the brand “communicates” should be synchronised with what the marketer wants consumers to think about the product.

2. Decisions of Incentives:

In deciding to use a particular incentive, marketers have several factors to consider:

i. Size of the incentive

ii. Conditions for participation

iii. Duration of promotion

iv. Distribution vehicle

v. Timing of promotion

vi. Total sales promotion budget

Then marketers should pretest whether the tools are appropriate, the incentive size is optimal and the presentation method is efficient. Sellers use incentive-type promotions to attract new triers, to reward loyal customers and to increase the repurchase rates of occasional users. New triers are of 3 types.

Businesses can target sales promotions at three different audiences: consumers, resellers, and the company’s own sales force. Sales promotion acts as a competitive weapon by providing an extra incentive for the target audience to purchase or support one brand over another. It is particularly effective in spurring product trial and unplanned purchases.

Most marketers believe that a given product or service has an established perceived price or value, and they use sales promotion to change this price- value relationship by increasing the value and/or lowering the price. Compared to the other components of the marketing mix (advertising, publicity, and personal selling), sales promotion usually operates on a shorter time line, uses a more rational appeal, returns a tangible or real value, fosters an immediate sale and contributes highly to profitability.

A. Consumer promotion:

This is the most commonly used form of promotion. The factors to be considered are type of market, sales-promotion objectives, competitive conditions, each tool’s competitiveness. Consumer sales promotions are steered toward the ultimate product users—typically individual shoppers in the local market but the same techniques can be used to promote products sold by one business to another, such as computer systems, cleaning supplies, and machinery.

In contrast, trade sales promotions target resellers wholesalers and retailers—who carry the marketer’s product. Some of the most frequently followed consumer promotion tools are as follows (Some of the tools might sound overlapping or same. This is due to the fact that practically the tools are mixed and matched with each other to design newer and newer methods of promotion. We have tried to give here as many such methods as possible):

Quantity Deals:

More quantity of the same product is offered at no extra cost or just a nominal increase in the price of the larger quantity packs of the product. This kind of promotion generally aims at encouraging prolonged consumption period, trade up consumers to purchase larger quantity packs move larger quantity from factories.

Price Deals:

A consumer price deal saves the buyer money when a product is purchased. The main types of price deals include discounts, bonus pack deals, refunds or rebates, and coupons. Price deals are usually intended to encourage trial use of a new product or line extension, to recruit new buyers for a mature product, or to convince existing customers to increase their purchases, accelerate their use, or purchase multiple units. Price deals work most effectively when price is the consumer’s foremost criterion or when brand loyalty is low.

Price markdown:

This is a form of price reduction, which can be on-pack or off-pack. Off-pack is normally in form of coupons in a magazine or a newspaper that a customer can offer for redemption. Buyers may learn about price discounts either at the point of sale or through advertising. At the point of sale, price reductions may be posted on the package, on signs near the product, or in storefront windows.

Many types of advertisements can be used to notify consumers of upcoming discounts, including fliers and newspaper and television ads. Price discounts are especially common in the food industry, where local supermarkets run weekly specials. Price discounts may be initiated by the manufacturer, the retailer, or the distributor.

For instance, a manufacturer may “pre-price” a product and then convince the retailer to participate in this short-term discount through extra incentives. For price reduction strategies to be effective, they must have the support of all distributors in the channel. Existing customers perceive discounts as rewards and often respond by buying in larger quantities. Price discounts alone, however, usually do not induce first time buyers.

Premium offers:

These are free products that are provided in the pack or mailed if multiple proofs of purchase are sent in, either at no cost or at below-retail prices. The latter option is called self- liquidating premiums as the company recovers its out-of-pocket costs. An intelligently selected premium can be used to reinforce the brand image.

These offers provide instant gratification, plus there is no confusion about returning coupons or box tops, or saving bar codes or proofs of purchase. Colgate offered a free toothbrush with toothpaste. Suzuki Shogun bike offered Ray-Ban sunglasses free with the bike s a part of sales promotion offer.

With-pack premium:

It accompanies the product inside or on the package. The package itself can serve as a premium. Few days ago Himalaya range of cosmetics offered a face wash free with face packs.

Free in the-mail premium:

It is mailed to consumers who send in a proof of purchase. This is very popular in some brands of wristwatches where one has to fill up a small coupon given inside the pack and send it as a proof of purchase.

Self-liquidating premiums:

This is sold below its normal retail store price to consumers who request it. a method where the consumer mails in a stipulated number of proofs of a purchase along with the fee to cover manufacturer’s costs of shipping and handling of premium item. From manufacturer’s point of view this form of promotion is cost free, and therefore the name is self-litigating

Mail premiums:

Unlike direct premiums, require the customer to perform some act in order to obtain a premium through return mail. An example might be a limited edition toy car offered by a marketer in exchange for one or more proofs-of-purchase and a payment covering the cost of the item plus handling. The premium is still valuable to the consumer because they cannot readily buy the item for the same amount.

Price packs:

These are the packs that offer consumers a lower than the regular price of a product or greater than usual quantity, flagged on the label or package. Example: “Now 25% more at regular price.” A recent study has found out that consumers process price promotion information in the form of U-shaped curve. These findings indicated that when the price discounts are low (less than 15%) or high (above 50%), consumers do not process information extensively and they leave or accept that offer respectively.

It is only at moderate level of price discounts (approximately 25-30%) that the consumers process information more elaborately due to higher level of uncertainty of the merits in the deal. For example Colgate offered 125gm in a tube for the price of l00gm.

Banded packs:

Another type of price deal is the bonus pack or banded pack. When a bonus pack is offered, an extra amount of the product is free when a standard size of the product is bought at the regular price. This technique is routinely used in the marketing of cleaning products, food, and health and beauty aids to introduce a new or larger size. A bonus pack rewards present users but may have little appeal to users of competitive brands. A banded pack offer is when two or more units of a product are sold at a reduction of the regular single-unit price.

Sometimes the products are physically banded together, such as in toothbrush and toothpaste offers. Two related items are combined and sold at a reduced price also in this promo. E.g. a toothbrush offered with toothpaste. Nivea in the month of March and April, 2004 gave an offer that with Nivea body talc big pack, one small pack of Nivea comes at a total cost of Rs. 65 instead of market price of Rs 75.

Reduced price pack:

This is single package sold at a reduced price. Example: “2 for 1” offer.

Free sample offer:

This involves distributing samples or free packs offer a free amount of a product or service delivered door to door, sent in the mail, picked up in a store, attached to another product or featured in an advertising offer. Normally this method is used in the context of a product introduction.

Coupon collecting schemes:

These are the certificates entitling the bearer to a stated saving on the purchase of a specific product mailed, enclosed in other products or attached to them or inserted in magazine or newspaper ads. Free prize game or scratch cards and coupons are distributed. The coupons that are in or on the pack are specifically designed to build repeat purchase and loyalty whereas those that are carried in other products consumed by a similar target market (coupons for a baby shampoo carried in a diaper product) known as Cross-ruff coupons are designed to attract new customers. These coupons can be collected and exchanged for promotional offers. Redemption rate varies with mode of distribution.

Coupons:

Coupons are another, very versatile, way of offering a discount. Consider the following examples of the use of coupons:

On a pack to encourage repeat purchase

In coupon books sent out in newspapers allowing customers to redeem the coupon at a retailer

A cut-out coupon as part of an advertisement

On the back of bill receipts

The key objective with a coupon promotion is to maximise the redemption rate – this is the proportion of customers actually using the coupon.

One problem with coupons is that they may simply encourage customers to buy what they would have bought anyway. Another problem occurs when retailers do not hold sufficient stocks of the promoted product – causing customer disappointment.

Use of coupon promotions is, therefore, often best for new products or perhaps to encourage sales of existing products that are slowing down.

Thus coupons are one of the most commonly used types of sales promotion. In marketing a coupon is a ticket or document that can be exchanged for a financial discount or rebate when purchasing a product. Customarily, coupons are issued by manufacturers of consumer packaged goods or by retailers, to be used in retail stores as a part of sales promotions. They reach customers through mail, magazines, newspapers and the Internet. Internet coupons have become very popular as of late, because the cost is borne by the user (who has to print the coupons himself) rather than the businesses issuing the coupons.

Coupons first came into widespread use in the United States in 1909, when C. W. Post came up with the idea to help sell breakfast cereals and other products. Today, more than 700 corporations offer coupon discounts. Each year, coupons generate more than 8 billion dollars in transactions within the U.S. alone.

In 2006 Amul used this form of promotion. It issued 30 coupons of Rs. 1 each on the back page of a National daily newspaper with 30 dates of a month on each one. Customers were supposed to cut them and submit one coupon each on its respective date to the retailer and could thus avail a discount of Rs. 1 on each packet of milk each day for a month.

Another type of loyalty incentive is the trading stamp. It is distinct from a coupon in that a coupon is redeemable for a specific product or class of product, whereas a trading stamp acts like a currency, or a token economy. It was used as a temporary currency for some former Soviet countries, especially Moldova (used until 1993, replaced by Moldovan lei), and Ukraine (replaced by hryvnia in 1996) after they became independent. There are also internet sites that have coupons that can be used online.

Online retailers usually refer to Internet coupons as “coupon codes,” “promotional codes,” “promotion codes,” “discount codes,” “key codes,” “promo codes,” “shopping codes,” “voucher codes” or “source codes.” Internet coupons typically provide for reduced or no cost shipping, a specific dollar or percentage discount, or some other special offer to encourage consumers to purchase specific products or to purchase from specific retailers. The term “coupon” is also used in manufacturing and material science to refer to a small piece of material used for testing or further processing, compare billet.

Competitions:

Usually on-pack and with questions to be answered. Gifts are given for answering correctly or for the first few correct entries.

New products like electronic gadgets etc. are put on a demonstration to build in-store traffic and sales.

Cash refund offers (rebates):

These provide price reduction offers after purchase. A refund or rebate promotion is an offer by a marketer to return a certain amount of money when the product is purchased alone or in combination with other products. This can be done at the point of purchase in case of durable products like cars, home appliances or the consumers have to send a specified “proof of purchase” to the manufacturer who “refunds’ part of the purchase price by mail. Refunds aim to increase the quantity or frequency of purchase, to encourage customers to “load up” on the product.

This strategy dampens competition by temporarily taking consumers out of the market, stimulates the purchase of postponable goods such as major appliances, and creates on-shelf excitement by encouraging special displays. Refunds and rebates are generally viewed as a reward for purchase, and they appear to build brand loyalty rather than diminish it.

Prizes:

These are the offers of the chance to win cash, trips or merchandise as a result of purchasing something.

Contest:

It calls for customers to submit an entry to be examined by a panel of judges who will select the best entries. Contests can be dealer contest or consumer contests. Dealer contest is a closed affair whereas the consumer contest is given a wide publicity to attract participation. Contests can be beauty contest, quiz or rallies in case of automobiles. For example Lakme lever held the “Elle 18 create your own shade” contest for the target audience of the Elle 18 range of colour cosmetics and fragrances. The participants were asked to create their own shades of nail enamel. The winner Sabah Mansoor created a sparkling blue shade and Lakme launched it in the market. Horlicks ran a contest of finding the most lively child in the Durga Puja Pandals in Kolkata.

Sweepstakes:

It offers the greatest potential to reinforce brand’s advertising platform. Benson & Hedges when launched a 100-mm-length version, they ran a sweepstakes where the consumers had to pick which one of a hundred minicontests they wanted enter, in which each of these minicontests had as their prize 100 units of something.

The main difference between contests and sweepstakes is that contests require entrants to perform a task or demonstrate a skill that is judged in order to be deemed a winner, while sweepstakes involve a random drawing or chance contest that may or may not have an entry requirement. At one time, contests were more commonly used as sales promotions, mostly due to legal restrictions on gambling that many marketers feared might apply to sweepstakes. But the use of sweepstakes as a promotional tactic has grown dramatically in recent decades, partly because of legal changes and partly because of their lower cost. Furthermore, participation in contests is very low compared to sweepstakes, since they require some sort of skill or ability.

Game:

It presents consumers with something every time they buy. It comes in forms of numbers, missing letters etc which can be played and enjoyed by the customers later. For example puzzles with gems and other kind of children products.

Patronage awards:

These are the values in cash or in other forms that are proportional to patronage of a certain vendor or group of vendors.

Continuity Programs:

Continuity programs retain brand users over a long time period by offering ongoing motivation or incentives. These are also called loyalty programs. Continuity programs demand that consumers keep buying the product in order to get the premium in the future. Trading stamps, popularized in the 1950s and 1960s, are prime examples. Consumers usually received one stamp for every dime spent at a participating store.

The stamp company provided redemption centers where the stamps were traded for merchandise. A catalog listing the quantity of stamps required for each item was available at the participating stores. Today, airlines’ frequent-flyer clubs, hotels’ frequent-traveler plans, retailers’ frequent-shopper programs, and bonus-paying credit cards are common continuity programs. Westside has west club membership and cards and Pantaloons offer prestigious green card membership.

When competing brands have reached parity in terms of price and service, continuity programs sometimes prove a deciding factor among those competitors. By rewarding long-standing customers for their loyalty, continuity programs also reduce the threat of new competitors entering a market.

Free trials and sampling:

These invite prospective purchasers to try the product without cost in the hope that they will buy the product. A sign of a successful marketer is getting the product into the hands of the consumer. Sometimes, particularly when a product is new or is not a market leader, an effective strategy is giving a sample product to the consumer, either free or for a small fee. But in order for sampling to change people’s future purchase decisions, the product must have benefits or features that will be obvious during the trial.

There are several means of disseminating samples to consumers. The most popular has been through the mail, but increases in postage costs and packaging requirements have made this method less attractive. An alternative is door-to-door distribution, particularly when the items are bulky and when reputable distribution organizations exist. This method permits selective sampling of neighborhoods, dwellings, or even people. Another method is distributing samples in conjunction with advertising.

An ad may include a coupon that the consumer can mail in for the product, or it may include an address or phone number for ordering. Direct sampling can be achieved through prime media using scratch-and- sniff cards and slim foil pouches, or through retailers using special displays or a person hired to hand out samples to passing customers. Though this last technique may build goodwill for the retailer, some retailers resent the inconvenience and require high payments for their cooperation.

A final form of sample distribution deals with specialty types of sampling. For instance, some companies specialize in packing samples together for delivery to homogeneous consumer groups, such as newlyweds, new parents, students, or tourists. Such packages may be delivered at hospitals, hotels, or dormitories and include a number of different types of products.

Product warranties:

These include explicit or implicit promises by sellers that the product will perform as specified or that the seller will fix it or refund the customer’s money during a specified period.

Trading stamps:

These are generally used by large retailers and manufacturing companies. Such stamps are attached with the quantity of the purchase. This rewards customers’ loyalty as after accumulating a specified amount, they can be redeemed for various products and services. These are used as mentioned to increase loyalty, increase purchase quantity and ensure repeat purchase to keep away competition.

Tie-in promotions:

Two or more brands or companies team up on coupons, refunds and contests to increase pulling power. Multiple sales force push these promotions to retailers, giving them a better shot at extra display and ad space.

Cross-promotions:

Using one brand to advertise another non-competing brand.

POP displays and demonstrations:

POP (Point Of Purchase) displays and demonstrations, sometimes called merchandising at the point of purchase, (where the consumers make their actual purchasing decisions) may persuade a consumer to prefer one brand to another. Research into customer buying behaviour in retail stores suggests that a significant proportion of purchases results from promotions that customers see in the store. Attractive, informative and well-positioned point-of-sale displays are, therefore, very important part of the sales promotional activity in retail outlets. POP materials include:

i. Display racks, cabinets and trays

ii. Show cards

iii. Shelf tickets

iv. Sales literature in the form of booklets, leaflets, pamphlets

v. Special lighting

vi. Demonstration especially in case of relatively complex product

vii. Dummy packs and products, actual or over-size

viii. Shop window displays

ix. Danglers: A sign that sways when a consumer walks by it

x. Nets anti dispensers

xi. Cut outs

xii. Aisle interrupter: A sign the juts into the aisle from the shelf

xiii. Dump bin: A bin full of products dumped inside.

xiv. Glorifier: A small stage that elevates a product above other products

xv. Wobbler: A sign that jiggles

xvi. Lipstick Board: A board on which messages are written in crayon

xvii. Necker: A coupon placed on the ‘neck’ of a bottle

xviii. YES unit: “your extra salesperson” is a pull-out fact sheet

These materials may be used in conjunction with opportunities to sample a product and other sales promotion tactics. But the problem with POP promotions is that many retailers do not like to handle the hundreds of displays, signs and posters they receive from manufacturers.

Value-added promotions:

This tool offers some value for the consumers. Akai value-added promotions offered good trade-in value on B/W TV sets at the purchase of new colour TV set.

Stamp plans and continuity premiums:

Type of promotion where the consumer is getting rewarded for continues use or repetitive purchase of a product/service, e.g., frequent flyer programs On-shelf couponing: Coupons are present at the shelf where the product is available Free-standing insert (FSI): A coupon booklet is inserted into the local newspaper for delivery. Checkout dispensers: On checkout the customer is given a coupon based on products purchased. On-line couponing: Coupons are available on line. Consumers print them out and take them to the store.

Happy Hour:

A temporary reduction in the price, for a fixed duration each day. Generally these are done to attract more crowd during that part of the day when normally footfalls are very less.

Blue Cross Sale:

This is primarily a United Kingdom retailing device for signifying a day of further reductions in the sale prices already on offer. It is usually marked by signs throughout the store showing a large blue cross, the words “Blue Cross Sale”, and indicating the percentage by which the sale prices are further reduced. On occasions it is advertised as “Blue Cross Day” but it is, in fact, not always strictly limited to just the one day! This device was first introduced in 1970 in the then Lewis’s Department Stores, and was originally the idea of Peter Wiard, the company’s Chief Accountant. It was introduced to reduce the inordinate time taken by staff re-marking all the individual sale tickets by the requisite percentage, in time for the following day’s opening time.

B. Trade promotions:

A trade sales promotion is targeted at resellers—wholesalers and retailers—who distribute manufacturers products to the ultimate consumers. This is another major component of sales promotion. The objectives of sales promotions aimed at the trade are different from those directed at consumers. The reasons for arranging this kind of promotion are

i. To persuade the retailer or wholesaler to carry the brand

ii. To persuade the retailer or wholesaler to carry more units than the normal amount

iii. To induce retailers to promote the brand by featuring, display and price reductions

iv. To stimulate retailers and their sales personnel to push the product

v. To develop in-store merchandising support, as strong support at the retail store level is the key to closing the loop between the customer and the sale

vii. Expand or improve distribution by opening up new sales areas (trade promotions are also sometimes used to distribute a new size of the product).

viii. Generate excitement about the product among those responsible for selling it.

The measures normally taken to accomplish the objective are:

Cash bonuses may be in the form of cash discounts or straight cash handouts to encourage volume sales, periodic stock building, etc.

Discounts and allowances:

There are times when the customer is given a benefit in terms of reduced price. Discounts and allowances are reductions to a basic price. They could modify either the manufacturer’s list price, the retail price (set by the retailer and often attached to the product with a sticker), or the list price (which is quoted to a potential buyer, usually in written form). The market price (also called effective price) is the amount actually paid. The purpose of discounts is to increase short-term sales, move out-of-date stock, reward valuable customers, or encourage distribution channel members to perform a function. Some discounts and allowances are forms of sales promotion.

Types of discounts and allowances:

Some types of discounts and allowances have already been discussed. Some other most common types of discounts and allowances are:

Cash discounts for prompt payment – These are intended to speed payment and thereby provide liquidity to the firm. They are sometimes used as a promotional device. Examples are:

4/10 net 30 – this means the buyer must pay within 30 days, but will receive a 4% discount if they pay within 10 days.

2/7 EOM – this means the buyer will receive a cash discount of 2% if the bill is paid within 7 days after the end of the month.

5/7 EOM net 30 – this means the buyer must pay within 30 days after end of month, but will receive a 5% discount if they pay within 7 days after the end of the month.

2/15 net 40 ROG – this means the buyer must pay within 40 days of receipt of goods, but will receive a 2% discount if paid in 15 days. (Source Wikipedia)

Quantity discounts:

These are price reductions given for large purchases. The rationale behind them is to obtain economies of scale and pass some (or all) of these savings on to the customer. This stimulates the purchase need among intermediary or the customer as the more they buy the more is the benefit they receive. In some industries, buyer groups and co-ops have formed to take advantage of these discounts. Generally there are two types:

Cumulative quantity discounts (also called accumulation discounts). These are price reductions based on the quantity purchased over a set period of time. The expectation is that they will impose an implied switching cost and thereby bond the purchaser to the seller.

Non-cumulative quantity discounts. These are price reductions based on the quantity of a single order. The expectation is that they will encourage larger orders, thus reducing billing, order filling, shipping, and sales personal expenses.

Trade discounts (also called functional discounts) – These are payments to distribution channel members for performing some function. Examples of these functions are warehousing and shelf stocking. Trade discounts are often combined to include a series of functions, for example 20/12/5 could indicate a 20% discount for warehousing the product, an additional 12% discount for shipping the product, and an additional 5% discount for keeping the shelves stocked. Trade discounts are most frequent in industries where retailers hold the majority of the power in the distribution channel (referred to as channel captains).

i. Seasonal discounts:

These are price reductions given when an order is placed in a slack period (example: purchasing skis in April in the northern hemisphere, or in September in the southern hemisphere). On a shorter time scale, a happy hour may fall in this category.

ii. Forward dating:

This is where the purchaser doesn’t pay for the goods until well after they arrive. The date on the invoice is moved forward – example: purchase goods in November for sale during the December holiday season, but the payment date on the invoice is January 7th.

iii. Promotional allowances:

These are price reductions given to the buyer for performing some promotional activity. These include an allowance for creating and maintaining an in-store display or a co-op advertising allowance.

iv. Brokerage allowance:

From the point of view of the manufacturer, any brokerage fee paid is similar to a promotional allowance. It is usually based on a percentage of the sales generated by the broker.

v. Trade-ins:

This can be a way of reducing the price. By offering more for a trade-in than it is actually worth, the net effect is to reduce the effective price earned by the seller. The advantage of this is it encourages replacement sales without altering the list price or the perceived value.

Dependence of price on quantity:

An extreme form of quantity discount is when, within a quantity range, the price does not depend on quantity:

i. If one wants less than the minimum amount one has to be pay for the minimum amount anyway

ii. If one wants an amount between two of the fixed amounts on offer, one has to pay for the higher amount

iii. These also apply in the case of a service with “quantity” referring to time. For example, an entrance ticket for a zoo is usually for a day; if one stays shorter, the price is the same. It is a kind of pass for unlimited use of a service during a day, where one can distinguish whether or not, when leaving and returning, one has to pay again. Similarly a pass can be for another period. In the case of long periods, it is obvious that one can leave and return without paying again.

iv. If one has to buy more than one wants, we can distinguish between the surplus just not being used, or the surplus being a nuisance, e.g. because of having to carry a large container.

The Allowances as an amount offered in return for the retailer’s agreeing to feature the manufacturer’s products in some way. Allowances are of 2 types

i. Advertising Allowances:

These are aimed at retailers for advertising the manufacturer’s products. An advertising allowance is a dividend paid by a marketer to a reseller for advertising their product. The money can only be used to purchase advertising—for example, to print flyers or run ads in a local newspaper. But some resellers take advantage of the system, so many manufacturers require verification.

A display allowance is the final form of trade promotional allowance. Some manufacturers pay retailers extra to highlight their display from the many available every week. The payment can take the form of cash or goods. Retailers must furnish written certification of compliance with the terms of the contract before they are paid. Retailers are most likely to select displays that yield high volume and are easy to assemble.

ii. Display Allowances:

These are rewarded for carrying a special product display at the prominent places

iii. Bill-back Allowances:

Manufacturer pay this type of allowances to the retailers on a pre-case basis only if certain performance criteria are met.

iv. Count-Recount Allowances:

Under this type of trade promotion, the discount is applied not to the quantity the retailer buys form the manufacturer during the promotional period, but only to that quantity that is moved from the retailers’ warehouses into the retailers stores. As a consequence, the retailer is given a greater incentive to pass the price cut on to the consumer so that the product moves from the store into consumers’ hands.

v. Buying Allowances or Off-Invoice:

These are price cut of a certain percentage applied to the volume bought by a retailer during the promotional period. No retailer performance (such as displays, feature ads) is required. Retailers often purchase more than they can sell during such promotional periods, which is called bridge buying or forward buying.

vi. Slotting or Facing Allowances:

These allowances are one-time fees paid by the manufacturer to the retailer to get a new brand on the retailer’s shelf, paid to compensate the retailer for the brand removed to make space for this new brand and for associated inventory and administrative costs and the risks involved with the new brand. The slotting allowance is a controversial form of buying allowance.

The controversy stems from the fact that in many instances this allowance amounts to little more than paying a bribe to the retailer to convince them to carry your company’s products. But many marketers are willing to pay extra to bring their products to the attention of consumers who are pressed for time in the store. Slotting allowances sometimes buy marketers prime spaces on retail shelves, at eye level or near the end of aisles.

vii. Free goods allowance.

In this case, the manufacturer offers a certain amount of product to wholesalers or retailers at no cost if they purchase a stated amount of the same or a different product. The allowance takes the form of free merchandise rather than money.

Credit terms:

These may be extended to promote bulk buying by retailer.

Deal Loaders:

A deal loader is a premium given by a manufacturer to a retailer tor ordering a certain quantity of product. Two types of deal loaders are most typical. The first is a buying loader, which is a gift given for making a specified order size. The second is a display loader, which means the display is given to the retailer after the campaign. For instance, General Electric may have a display containing appliances as part of a special program. When the program is over, the retailer receives all the appliances on the display if a specified order size was achieved.

Trade Deals:

Trade deals are special price concessions superseding, for a limited time, the normal purchasing discounts given to the trade. Trade deals include a group of tactics having a common theme—to encourage sellers to specially promote a product. The marketer might receive special displays, larger-than-usual orders, superior in-store locations, or greater advertising effort. In exchange the retailer might receive special allowances, discounts, goods, or money. In many industries, trade deals are the primary expectation for retail support, and the marketing funds spent in this area are considerable. There are two main types of trade deals: buying allowances and advertising/display allowances.

Staff incentives:

These are the payments or prizes provided by suppliers given for attainment of specific promotional targets. Staff training by suppliers may also be considered under this heading

Dealer loader:

An incentive given to induce a retailer to purchase and display a product.

Free goods:

This scheme offers extra amount of merchandise to intermediaries who buy a certain quantity or who feature a certain flavour or size. Manufacturers might offer push money or free specialty advertising items to retailers that carry the company’s name.

Point-of-purchase (POP) Displays:

Manufacturers provide point-of-purchase (POP) display units free to retailers in order to promote a particular brand or group of products. The forms of POP displays include special racks, display cartons, banners, signs, price cards, and mechanical product dispensers. Probably the most effective way to ensure that a reseller will use a POP display is to design it so that it will generate sales for the retailer.

High product visibility is the basic goal of POP displays. In industries such as the grocery field where a shopper spends about three-tenths of a second viewing a product, anything increasing product visibility is valuable. POP displays also provide or remind consumers about important decision information, such as the product’s name, appearance, and sizes. The theme of the POP display should coordinate with the theme used in ads and by salespeople.

Price-off:

This is another tool where the companies discount off the list on each case purchased during a stated time period. This offer encourages dealers to buy a quantity or carry a new item that they might not ordinarily buy. The dealers can use the buying allowance for immediate profit advertising or price reductions.

Trade Inventory Financing or delayed Billing:

These financial incentives are used most often in durable goods industries, such as appliances or automobiles. The manufacturer lowers the cost to the retailer to purchase products to stock on the retail floor or in inventory, either by offering a reduced-rate financing facility, by delaying billing or by both.

Sweepstakes contests and Spiffs:

These are the incentives used to reward retail salespeople who meet their sales quotas for the manufacturer’s goods usually for durable goods, paid by the manufacturers. Ideally, these should be run concurrently with the consumer promotions. Push money (PM) also known as spiffs—is an extra payment given to sales-people for meeting a specified sales goal. For example, a manufacturer of refrigerators might pay a Rs. 300 bonus for each unit of model A, and a Rs. 200 bonus for each unit of model B, sold between March 1 and September 1. At the end of that period, the salesperson would send evidence of these sales to the manufacturer and receive a check in return. Although some people see push money as akin to bribery, many manufacturers offer it.

C. Business promotions:

7 his type of promotions looks for motivating sales force and utilizing other trade channels these include:

i. Sales Force Incentives:

This is normally in the form of cash payments or prizes for achievement of specific promotional objectives. However, even non-financial incentives appealing to status or pride are common. A very common example is to organise sales performance contest where at the end of month, quarter or year, ‘Best Salesperson’ award in the form of cash, gift or both is given to most successful sales person. Holmes and Smith provided some typical objectives for sales force incentives such as:

i. Increasing total sales volume

ii. Increasing sales of specific products

iii. Increasing sales of high profit product

iv. Reducing high inventory

v. Introducing new products

vi. Balancing seasonal sales variations

vii. Gaining new accounts

viii. Reactivating old customers

ix. Decreasing credit exposure

ii. Exhibitions:

These are used widely in the industrial, commercial and consumer goods as a means of promoting sales. E.g. the annual I.T. fair has participants from the I.T. industry, who promote their respective products. Companies must take decisions as to:

i. Aims to be achieved

ii. Which exhibitions, if any, they need to show at

iii. The size of stand to hire

iv. The location of the stand

v. The layout of the stand and its facilities

vi. Staffing of the stand

Choice criteria as to whether to participate or conduct an exhibition should include:

i. The nature of the exhibition and the types of people likely to attend

ii. The numbers of people likely to attend and their geographical locations, for instance, whether groups from overseas countries will be attending

iii. Costs

iv. Competitors showing or likely to book stands

v. Timing, whether exhibitions might coincide with the launch of a new product

vi. Assessments of impact on customer relations

vii. Opportunities for publicity and enhancement of corporate image

iii. Packaging:

Packaging is one of the lowest cost and highest leverage areas of marketing activity. It is like a silent salesperson in today’s self-service world. Packaging helps the product to stand out on the supermarket shelves. A retailer may decide to either accept or decline a product on the basis of its design rather than contents.

iv. Character Merchandising:

The use of characters on merchandise to enhance sales is promotion form, which is slowly gaining prominence. The most popular form of character merchandising is on items like Mugs and T-shirts. Walt Disney has used this to maximum benefit. In India, FMCG companies are widely implementing this strategy.

v. Sponsorship:

Sponsorship is another form of promoting oneself by linking the Product’s Brand name with any event that is compatible with brand image. ‘Femina Miss India awards’ is a prime example of this kind of promotion.

vi. Trade shows and conventions:

Participating in various industry-specific trade shows and business conventions is another sales promotion tool. They also provide a chance to demonstrate products, disseminate information, answer questions, and be compared directly to competitors.

Related to trade shows, but on a smaller scale, are sales meetings sponsored by manufacturers or wholesalers. Whereas trade shows are open to all potential customers, sales meetings are targeted toward the company’s sales force and/or independent sales agents. These meetings are usually conducted regionally and directed by sales managers. The meetings may be used to motivate sales agents, to explain the product or the promotional campaign, or simply to answer questions.

vii. Specialty advertising:

Some special forms of advertising and promotion are used now-a- days. A very recent example is in-film advertising, in blockbuster movie Hum Turn, the potato chip brand Lays of Frito Lays, a subsidiary of PepsiCo has been given extensive screen presence in exchange of which some lakhs of Lays packets advertised for the movie.

Thus we see that a marketer has ample choice of promotional offers to choose from. Moreover with advancement of knowledge and technology today marketers are been able to device various other innovative promotions.

After developing overall programmes, the marketers have to prepare implementation and control plans for each individual promotion. Implementation planning must cover lead-time and sell-in time. Lead-time is the time necessary to prepare the programme prior to launching it and Sell-in-time begins with the promotional launch and ends when approximately 95% of the deal merchandise is in the hands of the consumers. The last step is to evaluating results. There are 3 possible methods to measure sales promotion effectiveness. These are:

i. Sales data:

These are available from internal sources and form external auditing agencies like ABC (Audit Bureau of Circulation) and NRS (National Readership Survey) reports for newspapers and magazines.

ii. Consumer surveys:

These can be conducted to learn how the consumers can recall it, what is their perception and what is their post-promotion purchase behaviour.

iii. Experiments:

These can be carried out for various incentive value, duration and distribution media. For example, a soap manufacturer can issue coupons with a small section of their products, which can be used to get price off on further purchase of the product. Now, tracking the resultant demand for redemption can help the company to analyse the impact of Sales Promotions and possible hike in sales if this tool is applied for the whole consumers.

3. Post Sales Promotion programmes:

i. Start working on a new campaign.

ii. Apply the learning gained from the promo.

iii. Set new targets for the sales teams. After the promo, they would have to work harder to achieve new targets.

iv. Managing promotions to build the brand should be one of the final objectives. Promotions cannot be looked down as below-the-line advertising. Advertising and promotions now go hand-in-hand. Use one to reinforce the other!

Some Popular Sales Promotions around the world

Rebate:

Some retailers have taken a step forward with offering consumers new ways to submit their rebates easily over the Internet, completely or partially removing any mail in requirements. Staples, CompUSA, Best Buy, Circuit City, Tiger Direct and Rite Aid currently offer an online submission option for all or some of the rebates they offer.

These special rebates are usually identified as such and have instructions for full or partial online submissions. This is touted as a more accurate processing of the rebate, reducing the potential for human or mechanical error and in many cases eliminating the postage costs associated with traditional mail in rebates. Virtually all the retailers mentioned above still let consumers submit rebates by mail if they so choose.

Free sample:

A free sample is a portion of food or other product which is given out in shopping malls, grocery stores, and other venues. Sometimes samples of non-perishable items are included in direct marketing mailings. The purpose of a free sample is to acquaint the consumer with a new product. The concept of a free sample is not unlike that of a test drive, in that a customer is able to try out a product before purchasing it. There are lots of free samples online. Often, people will create forums to share free samples they find, such as the SlickDeals.net forum

Few months age last year when Gamier fructis range of hair care was launched a free sample was distributed through small counters in big shopping malls. Even few months ago Sunsilk opened counters in big malls where they were offering the service of one shampoo on hair free.

Gimmick:

In marketing language, a gimmick is a unique or quirky special feature that makes something “stand out” from its contemporaries. However, the special feature is typically thought to be of little relevance or use. Thus, a gimmick is a special feature for the sake of having a special feature. A “gimmick” is the device that enables an illusion to work. A gimmick is not seen by the audience, as opposed to a “fake”, which the audience does see but does not realise that it is a “fake”, mistaking it to be a normal object. In marketing, product gimmicks are sometimes considered mere novelties, and not really that relevant to the product s functioning, sometimes even earning negative connotations.

However, some seemingly trivial gimmicks of the past have evolved into useful, permanent features. According to the OED, the word is first attested in 1926, defined in the Wise-Crack Dictionary by Main land Grant as a device used for making a fair game crooked”. Finding a successful gimmick for an otherwise mundane product is often an important part of the marketing process. For example, toothbrushes are often given various gimmicks, such as bright colors, easy-grip handles, or color-changing bristles so they appear more exciting to consumers. This is often done when trying to appeal to children, who often get more excited about the gimmick than the product.

Examples of Gimmicks:

Television: In television, gimmicks are often employed to make a TV series memorable, or help create a distinct theme.

Some particularly gimmicky shows include:

i. The Simpsons, which features two gimmicks in the show’s introduction sequence. Bart Simpson writing some lines as punishment on the chalkboard, and the couch gag, in which the cast runs onto a couch in some wacky manner. There are also some episodes where Lisa Simpson plays different music on her saxophone.

ii. South Park, in which the character of Kenny is killed off in nearly every episode

iii. Frasier, which features title cards that introduce each scene, as well as a mimed scene over the closing credits to Kelsey Grammer’s song about tossed salad and scrambled eggs.

iv. Home Improvement, which uses comical, computer-generated “wipes” to change scenes, and features a character named Wilson whose face is always obscured (see also unseen character)

Sales:

A pricing gimmick is often employed to increase sales of certain items, or to reduce inventory on items that aren’t moving well or are overstocked. Examples of these are BOGO or BOGOF (also В1G1 or BIG IF, an acronym for buy one get one free), and DotD (an acronym for Deal of the Day), typically used in sales promotions at various retail stores.

Real Life Case Scenario

HLL:

Remember Lalitaji endorsing the ever popular Surf? Or Lux being touted as the beauty “brand” of film stars? Positioning is all-pervasive, and growing by leaps and bounds, aiming to anticipate the aspirations of consumers and customers, respond creatively and competitively, with branded products and services, thus raising the quality of life. All of them are form Hindustan Lever Limited (HLL), which is India’s largest Fast Moving Consumer Goods (FMCG) Company. It is a leading player in home and personal care products, foods and beverages, and specialty chemicals.

The product portfolio with its wide range of products sets HLL apart. It has achieved market leadership in soaps and detergents (Surf) as well as hair and skin care products (Sun Silk, Dove). It is the second largest manufacturer of dental care products (Close-up, Pepsodent). HLL is also market leader in tea (Taj), processed coffee (Bru), ice cream (Kwality-Walls), tomato-based products (Kissan), jams and squashes (Kissan), and branded staples (Kissan Annapurna).

This is how HLL used sales promotion programmes to build its brands. We will discuss 4 instances:

1. Dove:

When Dove was launched in the market, people had a certain reservation against the product.

Why? There were two reasons:

Price factor:

Most housewives found Dove to be pretty steep and thus consumption was restrained.

Rumours:

There were wide spread rumours that one of its ingredients was animal fat. HLL began a sales promotion campaign that stated “Get Dove soap free with a kilo of Surf Excel. With this promotion tactic, HLL got the opportunity of converting “non-users” of Dove to users. At the same time changing attitudes of other detergent users by converting them to Surf users.

2. Close-Up:

HLL sought to increase usage of Close-Up amongst the target audience by introducing the travel tube, initially giving it free with every 200gm pack of toothpaste bought.

3. Fair & Lovely:

When attacked by Cavincare of Fairever fame, HLL adopted a defensive ‘Buy One Get One Free (BOGOF) strategy by giving away one more Fair & Lovely free with every purchase of it. This is one of the many ways by which a marketer can piggyback on the brand’s standing in the market.

4. Organics:

When Organics was first launched on the platform of “root nourishing” shampoo, consumers were skeptical towards the positioning. No one wanted to spend 36% extra when compared to Pantene.

Consumers were happy using coconut oil to strengthen the roots. What did Levers do to push the product? ‘Buy one get one free’ (BOGOF) on every small pack of Organics. The surprising aspect is that this promotion failed to work for Levers.

The next step that HLL took was of repositioning Organics. They found out that the common problem in India was hair breakage. Glucosil was added to the product for healthy hair and the product was now revamped on the grounds of beautiful and healthy hair.

Where promotion was concerned, HLL used an entirely new outlet – bookstores! Contests were conducted there and the winners were given Organics hampers. This exercise helped a lot in brand recall thereby placing Organics on the map of the consumers’ mind.